As of Nov. 2014, there were 59 million beneficiaries receiving monthly benefits checks, of which nearly 42 million were retired workers, more than 6 million were survivors of deceased workers, and close to 11 million were disabled beneficiaries. In total, the Social Security Administration (SSA) will pay out more than $800 billion in benefits payments this year alone.
But as has been well-publicized, the Old-Age, Survivors, and Disability Insurance Trust, or OASDI, is in long-term trouble. With baby boomers retiring there simply aren't enough workers to take their place and keep the worker-to-beneficiary ratio constant. Between 2014 and 2040 this ratio is expected to fall from 2.8-to-1 to 2.1-to-1. Also, people are living longer than ever before according to the Centers for Disease Control and Prevention. Long story short, by 2033 the OASDI is expected to have burned through its cash reserves, and a 23% benefits cut may be needed to sustain the program through 2087 if Congress doesn't take action.
However, another factor that isn't helping the SSA's cause, which is largely flying under the radar, is Social Security fraud.
The ridiculous way the SSA is being defrauded
With the Internal Revenue Service recently reporting that sophisticated cybercriminals attempted to gain access to around 200,000 taxpayers' accounts and file fraudulent returns on their behalf, it shouldn't be surprising that Social Security fraud is a problem for the SSA. But the manner in which this fraud is actually occurring, according to the Office of the Inspector General, or OIG, is so mind-numbing that it might have you banging your head against the wall.
According to a report released this past March from the OIG, the watchdog group identified approximately 6.5 million individuals who would be age 112 or older without death dates in the Numident database. Life expectancies in the U.S. are improving, but with an average life expectancy of 78.8 years, we're not doing this well! In fact, the OIG lists just 35 people aged 112 or older in the world as of Oct. 2013.
Per the OIG, some 1.4 million beneficiaries had death notes input into their records, but an official date of death had not been recorded, thus signaling, at least in the Numident system, that these individuals were still alive. Another 410,000 individuals had their payments terminated and death dates added, but the official death date information was not passed on to Numident.
This is a problem: deceased individuals aren't going to alert the SSA or the proper authorities if someone is using their Social Security number to collect payments fraudulently. And unsurprisingly, the OIG discovered that's probably what's happening. Between 2006 and 2011, the OIG says that individuals using nearly 67,000 Social Security numbers generated $3.1 billion in tips, wages, and self-employment income despite the fact that the employees' or self-employed individuals' names didn't match the Social Security number accountholders' names.
Perhaps the most egregious oversight noted by OIG involved an unnamed identity thief who opened bank accounts using Social Security numbers for individuals born in 1869 and 1893 -- according to the Numident database, these individuals were still alive!
Don't hold your breath for a quick fix to Numident's shortcomings, either. In response to recommendations from the OIG that suggest sweeping fixes and reforms, a spokesperson for the SSA had this to say,
"The recommendations would create a significant manual and labor-intensive workload and provide no benefit to the administration of our programs."
What you can do to reduce your chance of being a Social Security fraud victim
If there's anything we can learn about the SSA's antiquated Numident system, it's that we need to take precautions now to reduce our chances of becoming victims of Social Security fraud.
Arguably the most important thing you can do is take your Social Security card out of your wallet or purse. If you lose your wallet or purse and your Social Security card is inside, a criminal could instantly gain access to the tools necessary to open credit accounts in your name, open bank accounts (or deplete bank accounts), and potentially even claim Social Security benefits.
Another important point is that you need to be careful when inputting personal information, including your Social Security number, into your computer or laptop. If you don't have up-to-date antivirus software or a firewall protecting your home computer(s), or you access the Internet via a public Wi-Fi network at a coffee shop or airport, you could be exposing your information to sophisticated criminals who could use your information to open credit accounts or even claim your Social Security benefits (if you're retired or disabled).
Along those same lines, phishing scams are another thing to watch out for. Some of the best cybercriminals will send very realistic emails to retirees that offer them free goods or services, such as free vacations, if they simply enter their Social Security number. Phishing scams can give criminals instant access to your personal data, and are all the more reason to have up-to-date virus software on your computer.
Lastly, consider closely monitoring your credit reports for any odd or unauthorized activity. There's a chance that if a criminal has your Social Security number in his or her possession they will consider opening fraudulent credit lines in your name. Thankfully, you're able to get a free credit report once a year from all three credit reporting agencies, and if you really don't want to deal with monitoring your own credit report, you can seek the assistance of a credit monitoring service.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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